Weighing options: Sales tax rates vary by municipality

GENOA – When it comes to getting her shopping done, Mary Phillips has carefully weighed her options.

There’s the Piggly Wiggly grocery store as well as Dollar General in Genoa, where Phillips lives and works, but those stores don’t have the same selection as some of the big box chains. The closest options for that kind of shopping are in DeKalb and Belvidere, and both are about the same distance from Genoa.

Phillips said she’s aware of the 8 percent sales tax she pays when shopping in DeKalb, which is 1.25 percentage points higher than in Belvidere and 1.75 percentage points higher than in Genoa, but she’s happy to pay for the selection of stores and hopes that her money supports the community.

Sales tax revenues are critical to local governments in DeKalb County, particularly considering declining property values, which in turn can shrink property tax receipts. In an illustration of the country’s slow recovery from the Great Recession, tax receipts for many local communities were the same – or lower – in 2012 as in 2008.

The county’s two largest cities, DeKalb and Sycamore, each have an overall sales tax rate of 8 percent. That rate might not seem like much for everyday purchases, but people notice when they make large purchases, said Lonnie Paulsen Brint, co-owner of Paulsen Appliance & Electronics in Sycamore.

“When you have a $1,000 invoice, and you’ve got $80 on it for taxes, it’s a good chunk of money,” Paulsen Brint said.

Paulsen Brint said she doesn’t think a difference in sales tax rates takes customers away from her business, but it’s an important issue nonetheless.

“When they want to raise the tax, we voice our opinion, because even a quarter-percent matters,” she said. “On the big ticket items you notice it.”

Sales tax rates vary

Any good purchased in Illinois includes a 6.25 percent sales tax: 5 percent goes to the state, the county gets a quarter percent and the municipality where the item is purchased received 1 percent. Local governments can choose to add to that amount.

Rates in DeKalb and Sycamore, for instance, are higher because both cities have additional home-rule taxes of 1.75 percent.

By comparison, goods purchased in Genoa, Hinckley and Somonauk include a 6.25 percent sales tax, while in Cortland the rate is 7.25 percent.

Mark Davenport says Cortland voters approved an increase in sales tax because of the town’s proximity to DeKalb and Sycamore.

“We just wanted out fair share,” he said. “It’s been earmarked for improving sidewalks and other infrastructure. Right now we’re concentrating on sidewalks.”

DeKalb and Sycamore receive millions in sales tax revenue each year, and the funding is critically important to their budgets – so much so that DeKalb is trying to find ways to reduce the city’s dependence on the sales and use tax collections.

The City of DeKalb’s latest budget includes a goal to “Examine ways in which the [it] can become less sales-tax reliant.”

DeKalb expects sales and use tax revenue will make up 41 percent, or $12.7 million, of its total revenue between July 1, 2013, and July 1, 2014. Property taxes are expected to net 14 percent of revenue and utility taxes, 11 percent.

“When we were facing the rescession back a few years ago now, the more volatile tax revenues declined dramatically, so the thinking was we should not try to be so reliant on sales taxes,” acting City Manager Rudy Espiritu said. “So I think over the last few years we’ve diversified our tax base more than it was.”

Since 2008, DeKalb’s sales and use taxes have hovered around $12 million a year. Sycamore took a hit in 2009, but the increase to an 8 percent sales tax rate, which took effect in 2010, bumped revenues higher. It collected $896,000 in 2009 and was up to $1.4 million in 2011.

’Tough economy’ has led to revenue declines

Other smaller towns – like Shabbona, Kingston, Hinckley and Genoa – have seen tax revenues fall since 2008.

Genoa lost about $80,000 when its two grocery stores closed about the same time in 2012, administrative consultat Joe Misurelli said.

“It’s been a real tough economy,” he said. “We heard a lot of feedback from the public that it was unfortunate that they had to drive elsewhere to get more of a full-line grocery store, so we’re thrilled that Piggly Wiggly opened up.”

City Manager Brian Gregory said Sycamore city officials have focused more on keeping property tax rates down while sales and user taxes are expected to account for 49 percent of the city’s revenues streams in the latest budget.

“Over the years one of the things that we’ve done is try to keep our property rates down,” Gregory said. “... We watch our trends, and we’re very mindful that sales taxes are susceptible to swings in the economy, but we’re not taking an active stance to bring that down.”